China risks more economic woes as Japanese close factories after violent attacks on businesses.

REUTERS

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By Kazunori Takada and

CHRIS BUCKLEY,

Reuters

September 18, 2012

SHANGHAI/BEIJING - Major Japanese corporations, including top auto makers, announced factory shutdowns in China on Monday and urged expatriates to stay indoors ahead of what could be more angry protests over a territorial dispute between Asia's two biggest economies.

China's worst outbreak of anti-Japan sentiment in decades led to weekend demonstrations and violent attacks on well-known Japanese businesses such as Toyota and Honda, forcing frightened Japanese into hiding and prompting Chinese state media to warn that trade relations could now be in jeopardy. Another outbreak of anti-Japan sentiment is expected across China on Tuesday, the anniversary of Japan's 1931 occupation of parts of mainland China.

"I'm not going out today and I've asked my Chinese boyfriend to be with me all day tomorrow," said Sayo Morimoto, a 29-year-old Japanese graduate student at a university in Shenzhen.

Chinese Foreign Ministry spokesman Hong Lei said the government would protect Japanese firms and citizens and called for protesters to obey the law.

"The gravely destructive consequences of Japan's illegal purchase of the Diaoyu Islands are steadily emerging, and the responsibility for this should be born by Japan," he told a daily news briefing. The islands, called the Senkaku by Japan and Diaoyu by China.

China and Japan, which generated two-way trade of $345 billion last year, are arguing over the uninhabited islets in the East China Sea, a long-standing dispute that erupted last week when the Japanese government decided to buy some of them from a private Japanese owner.

In response, China sent six surveillance ships to the area, which contains potentially large gas reserves. On Monday, a flotilla of around 1,000 Chinese fishing boats was sailing for the islands.

AN OLD WOUND THAT NEVER HEALEDThe weekend protests mainly targeted Japanese diplomatic missions but also shops, restaurants and car dealerships in at least five cities. Toyota Motor Corp and Honda Motor Co said arsonists had badly damaged their stores in the eastern port city of Qingdao at the weekend.

Toyota said its factories and offices were operating as normal on Monday and that it had not ordered its Japanese employees home. Honda said it would suspend production in China starting on Tuesday for two days. Fast Retailing Co, Asia's largest apparel retailer, said it had closed some of its Uniqlo outlets in China and may close yet more.

Japan's top general retailer, Seven & I Holdings, said it would close 13 Ito Yokado supermarkets and 198 "7-11" convenience stores in China on Tuesday, while Sony Corp is discouraging non-essential travel to China.Mazda Motor Corp will halt production at its Nanjing factory, which it jointly operates with Chongqing Changan Automobile Co Ltd and Ford Motor Co, for four days. Nissan Motor Co suspended China production for two days, starting Monday, sources said.

"I want to leave," said a Nissan executive, who declined to be named, in the southern Chinese city of Guangzhou. "Protests near my home were horrifying over the weekend."